Music fans in Spotify's seven markets now have two fewer reasons to use iTunes. On Wednesday Spotify added features that allow its users manage their iPods from within the Spotify software. A post at the Spotify blog says the feature was added because "iPod integration was [users'] biggest request."

In addition, Spotify users can look forward to better MP3 prices now that the company has taken over the management of its paid download service. Downloads were previously handled by white label download provider 7digital. The new Spotify download service gives users "competitive" prices as low as 50 pence per song (about US $0.83). Higher prices have not dissuaded customers from buying MP3s at iTunes. But the combination of iPod integration and competitive prices could help Spotify peel away some iTunes customers.

Here's how the demo video explains it: A friend sends you a playlist on Spotify. You buy the tracks on the playlist that you don't already own, and you upload the playlist instantly to your iPod Classic, iPod Nano or iPod Shuffle.

On its face, this announcement may appear to send mixed messages: Is it really a good idea to extol the benefits of the subscription model while encouraging users to buy and listen to MP3s? Adding iPod integration is a reflection of reality and a way to add value to non-paying users.

First, Spotify understands MP3 collections live side-by-side with its cloud-based tracks. People don't give up MP3s when they start using a subscription service. So in May 2010 Spotify's desktop client was updated to combine locally stored music files with a user's cloud-based collection.

Second, the new features give portability to all Spotify users with an iPod - which is a pretty huge population of music fans. Thus, users of Spotify's free, ad-supported service get a mobile benefit where none previously existed. Spotify's paying subscribers are the ones that get access to Spotify apps that offer unlimited access and caching. Non-paying users are limited to streaming through the desktop client.

Above all, these features are a preview of the competition we can expect in the download and subscription marketplace. If Spotify can chip away at the dominance of iTunes and gain an early advantage over the soon-to-launch Google Music, these features will be a valuable addition to the product.